We argue that a contract provides a reference point for a trading relationship: more precisely, for parties' feelings of entitlement. A party's ex post performance depends on whether he gets what he is entitled to relative to outcomes permitted by the contract. A party who is shortchanged shades...

We propose a new bankruptcy procedure. Initially, a firm's debts are cancelled, and cash and non-cash bids are solicited for the 'new" (all-equity) firm. Former claimants are given shares, or options to buy shares, in the new firm on the basis of absolute priority. Options are exercised once the...

We propose a new bankruptcy procedure. Initially, a firm's debts are cancelled, and cash and non-cash bids are solicited for the "new" (all equity) firm. Former claimants are given shares, or options to buy shares, in the new firm on the basis of absolute priority. Options are exercised once the...

We view a contract as a list of outcomes. Ex ante, the parties commit not to consider outcomes not on the list, i.e., these are ruled out'. Ex post, they freely bargain over outcomes on the list, i.e., the contract specifies no mechanism to structure their choice; in this sense outcomes on the...

We argue that a contract provides a reference point for a trading relationship: more precisely, for parties’ feelings of entitlement. A party’s ex post performance depends on whether he gets what he is entitled to relative to outcomes permitted by the contract. A party who is shortchanged...